Data fintech Plaid takes a fresh stab at payments

The financial data company Plaid is betting it can serve a demand for payments directly between bank accounts, a type of transaction that could reduce the need for cards.

Plaid on Thursday launched a program that pairs Plaid's technology with a network of partners to facilitate consumer and business payments funded by bank accounts. Nearly 50 companies in Europe and North America are in the network, including Checkout.com, Marqeta, Currencycloud, Square, Dwolla, Galileo, SoFi, Railsbank and Silicon Valley Bank.

This announcement comes about 10 months after Visa's $5.3 billion deal to acquire Plaid was called off, partly due to regulatory concerns that the deal would curtail competition. On Thursday Plaid told The Wall Street Journal the new service would complement card networks by adding an additional payment option, something Plaid's clients were requesting.

San Francisco-based Plaid's core offering is data aggregation, or a permission-based service that allows access to financial account information. As part of its new payment service, Plaid will combine its identity and authentication technology with its partners' payment processing capabilities to execute account-to-account transactions.

Plaid will also work with partners to offer payment initiation services, or the use of a platform that connects the merchant and consumer to support transactions that don't require a card.

The third-party processors, such as Square, will supply the technology to transfer the funds, with a "pay by bank" button appearing at digital checkout.

Plaid did not provide an interview by deadline. In materials the company sent to American Banker, Plaid contends account-to-account transfers are typically slow and cumbersome, requiring users to look up account numbers or wait several days for deposits to clear before a direct payment could be made. Plaid's payment service attempts to correct that by allowing faster authorization and processing via its partners.

Plaid also contends the shift to mobile commerce favors account-to-account transfers as a primary method of payment in the future.

The company cited internal research finding that 70% of U.S. consumers and 79% of U.K. consumers use fintech apps to make payments and access financial services, and research from the bank technology company FIS that found global use of mobile wallets has exceeded cash. Additionally, open banking payments in the U.K. reached 77,000 payments daily in August, up from 39,000 in January, according to OpenBanking.org.

“From one-person startups to the largest Fortune 500s, the overwhelming shift to digital finance has every company rethinking their payment journeys. As a result, we want to ensure that our clients have the most flexible tools for creating the best payment experiences for their unique customers,” Paul Williamson, head of partnerships and revenue at Plaid, said in a prepared note.

Account-to-account payments have an advantage over cards as they are often faster, cheaper and less risky, making them attractive to businesses for e-commerce, gaming and bill payments, according to Ron van Wezel, strategic advisor for retail banking and payments at Aite-Novarica.

"The open question remains if and how consumers can be convinced to use these alternative payment types rather than using their cards," van Wezel said.